Amid Drone Talk, Amazon Has Real Robots

Kiva Systems robots shown in a warehouse in 2011 before Amazon acquired the company.

Bloomberg News

Amazon got a lot of ink for its sci-fi drone delivery idea this week, but a more real and immediate robot effort underway in the Seattle retailer’s warehouses could save it as much as $916 million a year, according to one analyst.

Amazon’s rollout of robots from a company it bought called Kiva Systems–which can shuttle shelves full of merchandise to warehouse workers rather than the other way around–may help pare 20% to 40% off the typical $3.50 to $3.75 cost of fulfilling a typical order, says Shawn Milne, a Janney Capital Markets analyst in a research note.

“We believe this could be a significant opportunity to drive higher operating efficiency across Amazon’s massive fulfillment center network,” said Milne in his note.

Amazon has been working to drive down order costs and speed delivery, in part by constructing more warehouses closer to urban centers. And while many of its latest efforts focus on the delivery itself, Kiva robots could help improve efficiency within its warehouses where humans, and human error, still rule the day.

The company bought Kiva in March 2012 for $775 million but only recently announced any incorporation of the technology in its warehouses. Amazon disclosed in its third quarter earnings report it now has 1,400 Kiva robots in three of its warehouses.

“Amazon is very secretive, when they start talking about something you better pay attention,” said Milne in an interview. He estimated that a broad rollout of Kiva robots could save Amazon $458 million to $916 million annually based on warehouse efficiencies.

A spokeswoman for Amazon declined to comment.

Because Amazon warehouses are largely designed for workers who walk the aisles and pluck items, integrating the robots is likely a difficult proposition, said Milne. It may take several years for the online retailer to broadly deploy the robots, which look like large orange versions of Roomba vacuum cleaners.

Perhaps more tantalizing, Milne says, is the potential for Amazon to sell the robots to other companies. Before Amazon bought it, Kiva was charging about $2 million for a kit of robots and as much as $20 million for larger installations.

In the meantime, the public will remain fascinated with robots. Indeed, Amazon’s announcement on Sunday of its drone delivery idea seems to have prompted Google to disclose its own robot-building effort.